With 2025 now just 41 days away, investment experts are making their predictions for how the markets and US economy will fare during the next 12 months or so.
T. Rowe Price has released its annual market outlook with chief US economist for the fixed income division, Blerina Uruçi, expecting another strong year for the US economy thanks to several factors converging.
"Improving productivity could signal the end of generally lackluster growth seen since the global financial crisis,” she said. “Though rare, some of the factors that have historically driven positive productivity shocks appear to be in place today. With rising labor and non-labor costs, businesses are seeking to maintain output without sacrificing profits. Moreover, investments in capital and intellectual property have advanced AI and other technologies, increasing productivity with high capital and low labor needs."
Uruçi does not expect rising unemployment, assuming no reason for mass layoffs, but predicts a slowing of the labor market.
Inflation is likely to remain sticky which may restrict rate cuts in some global economies, while the Fed should be able to be less restrictive. However, energy costs could be a curveball while consumer spending is also likely to rebound.
"We expect the coming year will present a constructive environment for stock selection,” said Jennifer Martin, portfolio specialist, Global Equity. “Consumer and business balance sheets are in good shape, and the US economy is growing. Broadly, we are witnessing fundamental changes taking place globally that have led to unsynchronized cycles across different sectors, which are not as correlated as they have been in the past. We believe adopting an active approach will be required to navigate global markets responsibly."
The firm’s multi-asset investment team expects the market to broaden out over the next 6-18 months.
“The team is long value stocks, emerging markets, real asset equities, and international small caps, but neutral on US small caps,” commented Sébastien Page, head of Global Multi-Asset and CIO. “Value appears cheap relative to Growth, and the catalyst could be a passing of the baton on fundamentals. By the fourth quarter of 2025, year-over-year earnings growth for value stocks is expected to be comparable to that of growth stocks due to more favorable comparisons."
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